Technical Analysis for the Long Term

Reader D.C. emailed me yesterday with yet another relevant question:

In the past, you have looked at several macro trends. I recently looked at the Nasdaq on a weekly chart going back three years. I was curious if you think we are, in fact, building up to break down a three-year high of around 2025 to 2050 from July '01 to January '02.

It looks like an inverted head-and-shoulders (July '02 to February '03), then look at the entire large cup (January '02 to January '04). Are we now forming a handle? Is it possible to use these theories over longer periods of time, or are they only effective in the short term?

In answer to your last question, D.C., yes, I believe one can use technical analysis in almost any time frame one chooses, as I'm not sure the "edge" TA provides is any stronger or weaker in any one time frame.

With that in mind, let's look at the chart you're talking about.

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Today, the Dow Jones Industrial Average, Kyphon (KYPH - commentary - Cramer's Take), Cosi (COSI - commentary - Cramer's Take), Wal-Mart (WMT - commentary - Cramer's Take) and Taser (TASR - commentary - Cramer's Take).

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Charts produced by TC2000, which is a registered trademark of Worden Brothers Inc.

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And that is the final word from Eureka College, where in watching one of the many retrospectives on Reagan, I noticed he did something all likeable people do. He smiled. A lot. Instinctively or not, the man recognized it's tough to dislike someone who has a sunny disposition.

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Please note that due to factors including low market capitalization and/or insufficient public float, we consider Cosi to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes a daily technical analysis column for RealMoney.com and also produces a daily premium product for TheStreet.com called The Chartman's Top Stocks -- click here for a free two-week trial. While Gary cannot provide investment advice or recommendations, he invites you to send your feedback to [e-mail].